February 4, 2023

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How wrong the market

The cryptocurrency market has taken a hit this year, wiping over $2 trillion from its value since its peak in November 2021. Cryptocurrencies have been under pressure after the collapse of major exchange FTX.

Jonathan Ra | Norphoto | Getty Images

The year 2022 saw the start of a new “crypto winter,” as notable companies across the board collapsed, and cryptocurrency prices collapsed spectacularly. The events of the year took many investors by surprise and made the task of predicting the price of Bitcoin much more difficult.

The cryptocurrency market has been awash with pundits making frantic calls about where bitcoin will go next. It was mostly positive, although some correctly predicted the cryptocurrency to drop below $20,000 a coin.

But many market watchers were surprised by what was going on A tumultuous year for cryptocurrencywith the failure of high-profile companies and projects sending shock waves through the industry.

It began in May with the collapse of terraUSD, or UST, an algorithmic stablecoin that was supposed to be linked one-to-one with U.S. dollar. Its failure led to the collapse of terraUSD’s sister token Luna and hit companies with exposure to both cryptocurrencies.

Three Arrows Capital, a hedge fund with a bullish view on cryptocurrency, They indulged in filtering And the Filed bankruptcy due to its exposure to terraUSD.

Then came a file November FTX breakdown, one of the largest cryptocurrency exchanges in the world which was run by Sam Bankman-Fried, an executive who was often in the spotlight. The fallout from FTX continues to ripple through the cryptocurrency industry.

On top of the crypto-specific failures, investors also had to contend with rising interest rates, which put pressure on risk assets, including stocks and cryptocurrencies.

Bitcoin is down about 75% since hitting an all-time high of nearly $69,000 in November 2021 and over $2 trillion has been erased from the value of the entire cryptocurrency market. On Friday, bitcoin was trading below $17,000.

CNBC reached out to the people behind some of the boldest bitcoin price calls in 2022, asking them how they got it wrong and if the year’s events have changed their view of the world’s largest digital currency.

Tim Draper: $250,000

In 2018, at a tech conference in Amsterdam, Tim Draper predicted that bitcoin would reach $250,000 by the end of 2022. The famous Silicon Valley investor wore a purple tie with bitcoin logos, and even He rapped About digital currency on stage.

Four years later, it seems unlikely that Draper’s invitation will materialize. When asked about his $250,000 goal earlier this month, the Draper Associates founder told CNBC that $250,000 is “still digital” — but he’s extending his prediction by six months.

“I expect a trip to quality and decentralized cryptocurrencies like bitcoin, and some of the weaker coins to become relics,” he told CNBC via email.

Bitcoin would need to rally nearly 1,400% from its current price of just under $17,000 for Draper’s prediction to materialize. His reasoning is that despite the liquidation of high-profile market players like FTX, there remains a huge untapped demographic for bitcoin: women.

“I would assume that given that 80% of retail spending is controlled by women and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.

Nexo: $100,000

In April, Anthony Trenchev, CEO of cryptocurrency lender Nexo, told CNBC that he believed the world’s largest cryptocurrency could Over $100,000 increase within 12 months. Although it still has four months to go, Trenchev acknowledges that bitcoin is unlikely to rise to that high anytime soon.

Bitcoin has been “on a very positive trajectory” with increasing institutional adoption, Trenchev says, but “some major forces have intervened,” including leverage build-up, unsecured or low-quality borrowing, and fraudulent activity.

“I’m pleasantly surprised by the stability of cryptocurrency prices, but I don’t think we’re out of danger yet and second- and third-order effects are still in play, so I’m somewhat skeptical as far as the V-shape goes,” Trenchev said.

The businessman says he has also made bitcoin price predictions. “My advice to all, however, has not changed.” “Take a single-digit percentage point of your investable assets into bitcoin and don’t look at it for 5-10 years. Thank me later.”

Guido Buehler: $75,000

On January 12, Guido Bühler, former CEO of Swiss-regulated Ciba Bank, which focuses on cryptocurrencies, said his company has an “internal valuation model” of between $50,000 and $75,000 for bitcoin in 2022.

Buehler’s reasoning was that institutional investors would help drive the price up.

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At the time, bitcoin was trading between $42,000 and $45,000. Bitcoin never reached $50,000 in 2022.

The CEO, who now runs his own investment and advisory firm, said 2022 has been a “horrible year,” responding to CNBC’s questions about what went wrong with the call.

“The war in Ukraine in February shocked the paradigm of the global system and financial markets,” Boehler said, pointing to the consequences of increased market volatility and rising inflation in light of disruptions to commodities such as oil.

Another key factor was “the realization that interest rates are still the driver for most asset classes,” including cryptocurrencies, which “was a heavy blow to the crypto community, as there was a belief that this asset class was unrelated to traditional assets.”

Buehler said the lack of risk management in the cryptocurrency industry, lack of regulation and fraud were also major factors affecting the price.

The CEO remains bullish on bitcoin, however, saying it will reach $75,000 “sometime in the future,” but it is “all a matter of timing.”

“I believe BTC has proven its strength throughout the crisis since 2008 and will continue to do so.”

Paolo Arduino: $50,000

Paolo Ardoino, chief technology officer of Bitfinex and Tether, told CNBC in April that he expected bitcoin to drop sharply below $40,000, but end the year “much above” $50,000.

“I am a bitcoin bullish person… I see a lot going on in this industry and so many countries are interested in adopting bitcoin that I am really positive,” he said at the time.

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On the day of the interview, bitcoin was trading in excess of $41,000. The first part of the Ardoino call was correct – bitcoin fell below $40,000. But she did not recover.

In a follow-up email this month, Arduino said he believes in the resilience of Bitcoin and the blockchain technology behind it.

He told CNBC: “As mentioned earlier, predictions are difficult to make. No one could have predicted or predicted how many companies, which are appreciated by the global community, will fail in such a spectacular way.”

“There are still some legitimate concerns and questions about the future of cryptocurrency. It may be a volatile industry, but the technologies developed behind it are incredible.”

Deutsche Bank: $28,000

The main topic in 2022 was Bitcoin’s correlation with US stock indices, especially the high-tech Nasdaq 100. In June, Deutsche Bank analysts posted a note that bitcoin could end the year at a price close to $27,000. At the time of writing, bitcoin was trading at just over $20,000.

This was based on the belief of equity analysts at Deutsche Bank that the S&P 500 will rise to $4,750 by the end of the year.

But this call is unlikely to materialize.

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Marion Laborie, one of the authors of Deutsche Bank’s initial report on cryptocurrencies in June, said the bank now expects bitcoin to end the year at around $21,000.

“High inflation, monetary tightening, and slow economic growth are likely to increase downward pressure on the cryptocurrency ecosystem,” Laborie told CNBC, adding that traditional assets such as bonds may start to look more attractive to investors than bitcoin.

Laboure also said the high-profile meltdowns continue to hit sentiment.

“Every time a major player in the digital currency industry fails, the ecosystem suffers a crisis of confidence,” she said.

“In addition to a lack of regulation, crypto’s biggest hurdles are transparency, conflicts of interest, liquidity, and lack of reliable available data. The collapse of FTX is a reminder that these issues remain unresolved.”

JPMorgan: $13,000

In a research note dated November 9, JPMorgan analyst Nikolaos Panegirzoglou and his team predicted that the bitcoin price would drop to $13,000 “in the coming weeks.” They benefited from hindsight after FTX’s liquidity crunch, which they said would usher in a “new phase of crypto deleveraging,” putting negative pressure on prices.

Analysts said the cost it takes miners to produce new bitcoins has historically acted as a “floor” for the bitcoin price and is likely to revisit the $13,000 low seen during the summer months. This is not as far away from the current Bitcoin price as some other predictions, but it is still well below Friday’s price of just under $17,000.

A JPMorgan spokesperson said Panigirzoglu is “not available for further comment” on his research team’s projections.

Ultimate Strategic Research: $13,000

Ian Harnett, co-founder and chief investment officer of macro research firm Absolute Strategy Research, Be warned in June The world’s top digital currency is likely to drop to $13,000.

Explaining his bearish call at the time, Harnett said that in past cryptocurrency rallies, Bitcoin subsequently tends to fall nearly 80% from all-time highs. In 2018, for example, the token dropped nearly $3,000 after reaching nearly $20,000 in late 2017.

Harnett’s target is closer than most, but bitcoin would have to drop another 22% to reach that level.

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When asked how he feels about the call today, Harnett said he is “very happy to point out that we are still in the process of deflation in the bitcoin bubble” and that a drop near $13,000 is still on the cards.

“Bubbles usually see about 80% reflectivity,” he said in response to e-mailed questions.

With the US Federal Reserve poised to raise interest rates further next year, an extended drop below $13,000 to $12,000 or even $10,000 after that cannot be ruled out, according to Harnett.

“Unfortunately, there is no intrinsic valuation model for this asset – in fact, there is no agreement whether it is a commodity or a currency – which means there is every possibility that this could go down if we see tight liquidity conditions and/or the failure of the entities/exchanges,” he said. other digital.

Mark Mobius: $20,000, then $10,000

Carol Alexander: $10,000

In December 2021, a month after bitcoin’s all-time high, Carol Alexander, professor of finance at the University of Sussex, said she expected bitcoin to drop to $10,000 “or more” in 2022.

Bitcoin at the time is down about 30% from its record near $69,000. However, many people talking about cryptocurrency at the time were expecting more gains. Alexander was one of the rare voices who went against the grain.

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“If I were an investor now, I would consider getting out of Bitcoin soon because its price will probably crash next year,” she said at the time. Its bear call was based on the idea that bitcoin has little intrinsic value and is mostly used for “speculation.”

Bitcoin hasn’t fallen as low as $10,000 — but Alexander is feeling good about her prediction. “Compared to other people’s predictions, mine was by far the closest,” she said in emailed comments to CNBC.

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